This is the third installment of a four-part series from Finance & Commerce.
Doug Speedling doesn’t strike anyone as an agitator. Sporting a neatly trimmed mustache, the owner of Speedling Construction in St. Paul comes off as a businessman who just wants to do what he does best: build things.
But when it comes to worker exploitation in the construction industry, Speedling isn’t afraid to get on his soapbox. Put simply, he’s tired of competing against those who cut corners by exploiting immigrant workers, many of whom are in the country illegally, and paying them off the books. The problem is all too common in Minnesota, he says.
The construction industry veteran is determined to highlight the issue.
“If I want to compete with this group that is paying cash to illegals, I will have to pay the same way they do: cash in a brown paper bag on Fridays,” Speedling told Finance & Commerce. “And it may not be the amount the worker thought he had coming.”
Speedling said the cash-in-brown-paper-bag behavior is nothing new.
“This has been going on for 10 years in the carpentry business,” he said. “I watched as [my crews were] replaced by illegal workers in the downturn of the market in 2008. I went from as high as 90 carpenters down to 12 in 2009.
“It is hard telling employees that have worked for us for over 15 years, ‘We no longer have work.’”
At issue is the use of subcontractors and “labor brokers” who pay workers off the books to avoid payroll taxes, workers compensation insurance, and other expenses — and are willing to compromise safety in the process. Migrant workers are seen as easy pickings because they tend not to complain for fear of retaliation.
Under pressure to reduce costs, general contractors, developers and owners are tempted to look the other way. Subcontractors who employ a shadow workforce can underbid legitimate contractors — much to the annoyance of those who play by the rules, according to labor officials, contractors and academics who spoke with Finance & Commerce.
“We have had meetings with developers where we are sharing this information,” said Burt Johnson, attorney for the North Central States Regional Council of Carpenters in St. Paul. “And then they look at us and say, ‘They [labor brokers] are just so cheap.’
“And we say, ‘Of course they are cheap. They are not paying taxes. They are not paying workers comp. Workers are working 60 hours a week with no overtime. That sounds cheap to me.’”
Worker exploitation has become a major talking point for the local carpenters and other trade unions. But union officials say it’s a problem for all reputable contractors — union or nonunion, commercial or residential.
“There are nonunion companies that are doing right by their employees and are doing the right thing,” Johnson said. “They are at the same competitive disadvantage that our union companies are. They are feeling it, too.”
With ownership stakes in a union shop and in a non-signatory firm, Speedling straddles both sides of the construction industry.
In letters to elected officials, Speedling has sounded off about the industry’s use and abuse of undocumented workers. Speedling says he wants people in positions of authority to crack down on the wrongdoers.
“It’s about time some leaders stepped up and started to lead,” Speedling said.
Matt Eide, president of Superior Contractors, shares Speedling’s concerns about bidding against those who break the rules.
“I would bid those projects, but [it makes] no sense for me to even bid them because I can’t compete. There is no sense of doing it. Their numbers are way cheaper. There is only one way they are doing it that cheap — by cheating the system somewhere,” he said.
Speedling said his company, and others that play by the rules, are at a competitive disadvantage in multiple respects. In some cases, for example, companies that employ illegal workers and pay them in cash are “buying more cranes and forklifts than I am in this busy market,” he said.
“The frustrating part is in most cases there will be a small fine and the ‘cash companies’ keep going,” Speedling added. “The other frustrating situation is the [general contractors] that hire the cash subcontractors know what is going on. So do the developers.”
Jessica Looman, executive director of the Minnesota State Building and Construction Trades Council, said the cheaters get away with it because they are “in the shadows.”
“It’s difficult for folks to bring sunshine and light to the business model itself. That is why we have to talk to workers, and make sure that owners are focusing on the people that are building their projects,” Looman said.
“You need to work with legitimate contractors to make sure every wall that is hung, every wall that is painted, even single part of your building — you should be intentional about who is doing that work.”
For the bad players in the industry, the potential windfall is so great that some view getting caught “as an acceptable cost of doing business,” said Kevin Pranis, marketing director of the Laborers International Union of North America, Minnesota and North Dakota chapter.
“Construction is a highly competitive industry,” Pranis said. “If one contractor can get away with [cheating], it’s difficult for the other contractors … not to go the same direction. They feel they don’t have a choice. We think that is critically important here.”
In Johnson’s view, two parts of the construction industry are growing in Minnesota: the union market and the part of the industry that cheats workers with help from labor brokers and traffickers.
“The part in the middle that is getting squeezed out is the legitimate nonunion player that had a position, but they are out there competing on a low-bid basis against people that are using [labor traffickers],” Johnson said.
“How do you compete with that? How do you compete against a trafficker in a low-bid part of our economy? You can’t do that.”